No, Failure To Raise Debt Ceiling Won't Cause Default

Debt Talks: When Treasury Secretary Jack Lew repeatedly says the government has no choice in paying its bills if the debt ceiling is breached, he must surely know it's not true. So why say it? In a word, politics.

As the nation's chief financial officer, the Treasury secretary has an enormous responsibility to shoot straight with the American public about the state of our finances. So does President Obama, for that matter.

But when it comes to the political dispute over raising the debt ceiling from its current $16.7 trillion, Lew unfortunately has not leveled with us.

Opting for political pressure over the truth, he has misinformed and unnecessarily frightened the public to help his boss gain leverage in debt talks with congressional Republicans.

Lew told CNN's "State of the Union" show last Sunday "there is no option preventing us from being in default if we don't have the cash to pay our bills."

No option? In reality, we have more than enough cash to pay our debts. Revenues flowing into federal coffers exceed our debt payments by nearly 12-to-1.

Sure, if we breached the debt ceiling, we would have to cut federal spending elsewhere and shut down some unnecessary functions of government — a kind of Super Sequester. But our debts would be paid.

Same is true with Social Security. But Lew and other Democrats have warned that even Social Security payments are in jeopardy if the debt ceiling isn't raised. Say what? Social Security is a pay-as-you-go program. By law, the money coming in should go straight out to retirees — not to a spendthrift Congress.

They know this. But, as in so much else with this administration, creating chaos is more important than telling the truth.

For the record, debt-rating service Moody's Investors Service Inc. said in a memo this week: "We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact."

Just to be clear, it added: "There is no direct connection between the debt limit ... and a default."

And someone who should also know is David Stockman, former head of the Office of Management and Budget under President Reagan. He told The Daily Ticker: "It is a complete red herring to say there will be a default. There will never be a time in which there is not enough cash to pay the interest."

Yet, as of Thursday, Lew was still warning of fiscal Armageddon if Congress didn't raise the debt ceiling. Well, the claims of imminent disaster made by Lew and Obama are false. They are merely a ploy to gain a political edge. In fact, whether the government defaults or not is entirely in the hands of Obama and Lew.

Lew can continue to pay interest on our debts as it comes due. And Obama, instead of pretending to have dictatorial powers, can negotiate with Congress over the budget — just as the Constitution envisions.

Let's be very clear: The president of the United States and the secretary of the Treasury are the ones using default as a political threat — not Republicans. The only way this nation will default is if the White House lets it.

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